DATE: Wednesday, October 22, 1997           TAG: 9710220478

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY MIKE ABRAMS 

        STAFF WRITER 

DATELINE: VIRGINIA BEACH                    LENGTH:   83 lines

ANOTHER SPECULATIVE OFFICE BUILDING FOR BEACH THE $10 MILLION, FOUR-STORY PROJECT IS EXPECTED TO HELP FULFILL A GROWING DEMAND FOR COMMERCIAL OFFICE SPACE.

A North Carolina real estate investment trust plans to break ground by January on a $10 million, four-story executive office building near Lynnhaven Mall.

The 103,000-square-foot structure is just the second purely speculative private office project undertaken in South Hampton Roads in recent years and the largest Class A building in the Lynnhaven corridor.

The size of about 50 average single-family houses, the building will occupy a 6.8-acre tract considered the last major office parcel in Oceana West Corporate Park.

The most recent speculative office building, Southport Centre in Virginia Beach, was privately financed and built without a single tenant committed to it. Close to half of the 60,000 square feet was leased by the time the building was completed.

At the building's July open house, industry watchers predicted that other developers would attempt to duplicate the success.

Raleigh, N.C.-based Highwoods Properties Inc. will develop the new building off Lynnhaven Parkway, near the former headquarters of HQ Home Quarters Warehouse. The trust expects to have at least half of the building leased by the time construction is completed next fall.

Among the planned amenities: a day porter, tall-cab elevators, extra communications and electrical capacity in the office suites and a sprawling outside courtyard.

In the latest of a string of deals, Highwoods recently acquired one of Florida's largest owners of office buildings, Associated Capital Properties Inc. of Orlando. The Wall Street Journal reported the move as another indication of the trust's push to dominate Southeastern office and industrial markets.

Founded in 1978, the publicly traded trust owns 451 suburban office, industrial and service center properties comprising 28.3 million square feet - equal to the size of about 26 Lynnhaven Malls.

The Lynnhaven corridor, dubbed by some as Virginia Beach's ``Golden Mile,'' has been one of the region's hottest of late. The area has upwards of 8 million square feet of retail, industrial and office space.

``If you are in the right market and in the right location of the market, you take a lot of the risk out of building a speculative office building,'' said Paul W. Kreckman, a Highwoods executive. ``We're looking at building a very nice profile down here.''

The trust's holdings include two acquired properties in Chesapeake, but the Beach building represents the first project initiated by Highwoods in Hampton Roads.

``We hope to have another building shortly behind this one,'' Kreckman said. ``We're here in the market to stay.''

Tuesday, the Virginia Beach Development Authority approved a lease/purchase agreement on the project.

Highwoods must pay the authority a $20,000 deposit, plus four annual payments of $45,000. In the fifth year, the developer also has a purchase option of $110,000 per acre, or $748,000, for the property.

The authority - an independent agency whose members are appointed by the City Council - holds an adjacent 1.2-acre parcel for future development. The new building will generate between $150,000 and $200,000 in new taxes annually, said Robert J. Ruhl, the business development manager in the city's Economic Development Department.

``This will help us market Virginia Beach,'' he said. CMSS Architects of Virginia Beach already has begun design work.

The top two floors are planned for companies seeking large spaces. The lower floors likely will be divided into smaller units. Officials expect to attract 14 to 16 tenants.

Rents are expected to be $17 a square foot per month, about average for South Hampton Roads top-of-the-line office space.

Donald R. Crigger, director of office leasing for Goodman Segar Hogan Hoffler commercial real estate, said he expects developers to build speculative space or partially pre-leased space incrementally because vacancy rates have been low for some time.

``Not a wave of it,'' he said. ``But certainly you're going to see a building here or there to meet the demand.'' ILLUSTRATION: [Artist's rendering]

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